HORIZONTAL SOCIAL COMPARISONS AND VERTICAL RECIPROCITY IN A PRINCIPAL–MULTI‐AGENT EXPERIMENT

The aim of this note is to investigate whether the incentive mechanism based on reciprocity is still effective in the presence of several agents by exploring a principal–multi‐agent relationship in a gift‐exchange experiment. The results show that horizontal social comparisons between agents can undermine the vertical reciprocity‐driven incentive mechanism. When long‐term relationships or merit procedures are introduced in the experiment, reciprocity becomes effective again.